Onchain Crypto Collateral Favored by Lenders for Better Loan Terms
Fabian Dori, Chief Investment Officer at digital asset bank Sygnum, emphasized that lenders offering crypto-backed loans prefer onchain crypto assets as collateral rather than crypto held in investment vehicles such as exchange-traded funds (ETFs). According to Dori, onchain collateral provides superior liquidity and operational flexibility, which benefits both lenders and borrowers.
Dori explained that onchain crypto assets enable lenders to perform margin calls around the clock and liquidate collateral in real-time. This continuous accessibility allows lenders to offer borrowers higher loan-to-value (LTV) ratios compared to loans backed by ETFs, which are constrained by traditional market hours. He stated, “It’s actually preferable to have the direct tokens as collateral, because then you can do it 24/7. If you need to execute a margin call on an ETF on Friday at midnight, when the market is closed, then it’s more difficult.”
Loan-to-value ratios in crypto lending represent the proportion of the loan amount relative to the value of the collateral, which can include Bitcoin (BTC), Ethereum (ETH), or other accepted tokens. Higher LTV ratios allow borrowers to access more credit against the same collateral, while lower LTVs limit borrowing capacity.
Crypto Lending Market Recovery and Institutional Adoption
Following a steep decline during the 2022 bear market—marked by the collapse of several crypto lending firms—the crypto-backed loan sector is showing signs of recovery. Dori expressed confidence in the continued growth of crypto lending as digital assets gain broader acceptance.
Institutional interest in crypto-backed loans is rising, with companies like Figure Technology recently listing on the Nasdaq exchange. The company’s stock surged over 24% on its debut, reaching a market capitalization exceeding $6.8 billion. Meanwhile, traditional financial institutions are increasingly exploring crypto lending opportunities. JP Morgan, for example, is reportedly considering launching crypto-backed loans for clients, potentially as early as 2026.
As regulatory frameworks evolve and market infrastructure improves, the integration of crypto collateral into mainstream lending could accelerate, offering new avenues for credit access and financial innovation.
FinOracleAI — Market View
The preference for onchain collateral enhances lender confidence by improving liquidity and enabling real-time risk management, which supports higher loan-to-value ratios and could stimulate demand for crypto-backed loans. The revival of crypto lending, coupled with growing institutional participation and regulatory progress, suggests a positive trajectory for the sector. However, market volatility and regulatory uncertainties remain key risks to monitor. Upcoming developments from major financial institutions like JP Morgan will be critical indicators of mainstream adoption.
Impact: positive
